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Presto! Turning what was a commodity into a waste

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Recyclers play a unique role in the economy, flanked by sellers of used goods on one side and by trash collectors on the other. All three deal with products no longer wanted by businesses and households. The difference is whether an item can be resold for its original function, as a raw material, or not at all. The economic tailspin that began in late 2008 threatens to redraw some of those boundaries.

Cities with market-sensitive contracts for curbside recyclables discovered this early. Their commodity mixtures no longer had net-positive value when set against the cost of handing and transportation, so instead of enjoying a share of a contractor's sales revenue they were paying for removal. Last summer, the program in Madison, Wis., was getting $106,000 a month from its recycling contractor; in November, the same vendor billed the city for $41,249.

If the dismal economic environment persists for several years, towns and counties may rethink how much curbside recycling they are prepared to support. New York City, for example, dropped glass and plastics recycling from 2002 to 2005 to save money.

In recent months, with dealer buying prices no longer sufficient to justify the expense and effort of gathering obsolete scrap, the number of peddler trucks bringing over-the-scale offerings to scrapyards has shrunk drastically.

Most scrapyards know to expect boom and bust cycles in commodities, although the extent of the current decline is worse than usual. Sometimes, though, it's a lender bank rather than management that decides whether hunkering down will be sufficient for a yard to make it to the next upswing.

U.S. scrap industry historian Carl Zimring, an assistant professor at Roosevelt University in Chicago, said his research goes back 140 years and the current slump is probably among the three worst.

"The panic of 1873 put scrap iron in a free-fall over the summer and autumn of that year. The Great Depression decimated the scrap brokerage trade between 1929 and 1933," he said in a recent e-mail exchange with AMM. "When manufacturers' production declines, so does their demand for inputs. Who, then, is going to be the market for scrap? It becomes a waste to be managed rather than a commodity to be traded."

Adam Minter, a China-based scrap writer, recently posted a blog comment saying that many environmentalists have failed to grasp the commercial underpinnings of recycling. "For the last decade, the global boom in scrap commodities has been driven not by green consciousness, but instead by consumer demand for products that require raw materials," he wrote. China became the key consumption site. "Believe me, China didn't take on this role for philanthropic purposes. It took the role on because, at a time of unprecedented market demand for its products from the developed world, it didn't have sufficient domestic sources of raw materials. It was an extraordinary cycle while it lasted. In retrospect, this was totally unsustainable."

Minter said that the quantity of recyclables left for pickup is a bad measure of environmental virtue. Often, "it just means that people are throwing away perfectly usable stuff that they either don't have the imagination to reuse on their own or don't want to. In China and other developing countries, there's actually very little recycling because old products are reused and rehabbed." Some of the discards could still be useful without being ground up or melted, Minter said. Other materials—such as elaborate packaging—weren't needed in the first place.

Zimring said government recycling activities are a wild card in the current situation. While scrap prices have crashed before, they have not done so since recycling became a widespread environmental ethic in American society. Thousands of public recycling programs are in place across the United States, all charged with reducing the amount of waste going to landfills.

"In that sense, the current crisis is different from what we experienced in downturns in the 19th and 20th centuries," Zimring said. He expects "some hard choices about disposal in the coming months" if low demand for curbside recyclables persists.

Another wild card is whether government policies may intentionally raise the cost of alternatives to recycling. At the municipal and county level, there's "pay as you throw." In one version, curbside pickup only takes bags or bins that carry labels showing prepayment for the service. The fees prod people to remove all recyclables from trash and provide the city with useful revenue flow when recyclables aren't worth much.

At the national level, some countries are considering a "cap and trade" program for companies whose activities give off gases that are deemed to cause global warming. Companies that reduce such pollution would receive payments from those that don't in an attempt to lower such emissions overall. One consequence could be to raise costs for many producers of ore-based primary metals, which could allow higher prices for scrap-based metal units and higher recycling ratios.

The desired impacts might be weak, however, if some countries that are big in primary metals decide to ignore the greenhouse gases issue. Metals producers located there would find their cost structures unchanged.

New technologies also will affect the economics of recycling, probably in a positive way. Defunct vehicles used to be recycled haphazardly. A federal law was enacted in 1965 dealing with the problems of "automobile graveyards"—ugly properties with unwanted car bodies that often were located near federal highways—and in 1968 came Nucor Corp.'s electric furnace mill in South Carolina and the development of scrap shredders large enough to grind up cars and trucks.

Automobile graveyards? "My sense is that the term fell out of common usage in the early '70s," Zimring said. PAUL SCHAFFER

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